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Free Cash Flow

Just as your pulse is checked during a routine physical, free cash flow is used as an indicator of a company's health. It equals the cash brought in from operations minus the money needed to pay the bills. Think about leftover money in your checking account after you pay this month's bills.

Investors and analysts see this leftover money as a gauge of a company's ability to perform. It is available for transactions such as handing out dividends and working on new products.

Some argue free cash flow is wrongly overshadowed by the emphasis often placed on earnings. Earnings numbers can be manipulated and don't always tell the whole story -- and earnings don't mean much if there's nothing left over after a company pays its expenses. Even if you bring in a six-figure salary, but no money left after paying the bills, are you in great financial shape?

You don't have to be Einstein to figure out free cash flow. To calculate the number, subtract the company's expenditures and dividends from its operating cash flow.

If the free cash flow is written in red ink, it doesn't necessarily signal curtains. This is common for young companies looking to grow. It also could be a result of heavy investments, which in the long run could be worth a standing ovation.

Cheryl Casone

Cheryl Casone

Cheryl Casone

Cheryl Casone joined FOX Business Network (FBN) in September 2007 as an anchor. Prior to FBN, Casone served as a correspondent for FOX News Channel’s (FNC) business unit and was a regular on FNC’s Your World with Neil Cavuto as well as Cashin' In, where she appeared initially as a contributor when it debuted in May 2001.

Casone brings years of experience covering finance, business, and consumer news to FBN. She has reported on the economic impact of war on the economy, consumer fraud, global markets, foreign investment, and corporate governance in addition to her work covering the U.S. markets.

Prior to FNC she worked as a freelance business correspondent for CNN primarily reporting from the New York Stock Exchange, and CBS Newspath as a general assignment reporter. Casone moved to New York to work as an overnight and early morning news anchor for MSNBC and NBC. Prior to that she anchored a business show for San Francisco’s KRON-TV, and served as a business and general assignment reporter. She began her career at CNX Media on the nationally syndicated program Travel Update.

Casone has served on the boards of the Associated Press Television and Radio Association, California and Nevada Regional Chapter, and American Women in Radio and Television, San Francisco Chapter.

A native of Dallas, TX, she graduated from Northern Arizona University.

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